United States v. Bank of New York & Trust Co., 296 U.S. 463 (1936)

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United States v. Bank of New York & Trust Co.

No.195
Argued December 18, 1935
Decided January 6, 1936 *
296 U.S. 463

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

1. The court first assuming jurisdiction over property may maintain and exercise that jurisdiction to the exclusion of other courts. P. 477.

2. This principle governs the state and federal courts, and is so applied by this Court as to insure harmony and cooperation between them P. 477.

3. The principle is not restricted to cases where property has been actually seized under judicial process before a second suit is instituted. It applies as well where suits are brought to marshal assets, administer trusts, or liquidate estates, and in suits of a similar nature, where, to give effect to its jurisdiction, the court must control the property. P. 477.

4. The jurisdiction granted to the District Court over suits by the United States, Jud.Code, § 24(1); 28 U.S.C. 41, is not exclusive, and the propriety of its exercise in a given case is determined by the particular circumstances. P. 479.

5. Upon the state courts, equally with the courts of the Union, rests the obligation to guard and enforce every right secured by the Constitution and laws of the United States whenever those rights are involved in any suit or proceedings before them. P. 479.

6. In intervening to present a claim in proceedings in a state court, the United States is a voluntary actor, not a defendant. P. 480.

7. Separate funds which had been deposited with the Superintendent of Insurance of the New York by three Russian insurance companies to qualify them for local business were liquidated and administered by him, under direction of the state court, for the satisfaction of local claims and of other claims that had been filed with him. In two of the cases, this administration was over, but the surpluses had, by order of court, been deposited with local trust companies, and proceedings were going on in the state court to determine the rights of other creditors and shareholders. In the other case, the statutory administration by the Superintendent was still in progress. In this posture, the United States brought three suits in the federal court against the three depositaries, respectively, in which it demanded accountings for and delivery of the funds in their hands. Its bills alleged that the companies had been dissolved and their assets confiscated by the Russian Government, and that that Government, in connection with its recognition by this one in 1933, had assigned the property in controversy to the United States.

Held:

(1) That the statutory proceeding was essentially in rem, the Superintendent being virtually a receiver. P. 475.

(2) In the other two cases, the proceedings in the state court were quasi in rem, control of the funds being essential to the exercise of the court’s jurisdiction to protect the rights of claimants. The funds being already in the hands of depositaries appointed by the court and subject to its direction, appointment of receivers was unnecessary. P. 476.

(3) The suits of the Government were not merely in personam to establish a right to share in property; their object was to take the property from the depositaries and from the control of the state court, and to vest it in the United States to the exclusion of all those whose claims were being adjudicated in the state proceedings. P. 478.

(4) Whatever the effect of the recognition of the Russian Government, it did not terminate the state proceedings. The state court still had control of the property, and questions as to the rights of the parties who were before it, or of those who might come before it, were legal questions which that court had jurisdiction to decide. P. 478.

(5) The fact that the complainant in the federal court is the United States does not justify a departure from the rule which would otherwise be applicable. The United States is free to invoke the jurisdiction of the state court for the determination of its claims, and the decision by the state court of any federal question which may be presented upon such an invocation may be reviewed by this. Court, and thus all the questions which the Government seeks to raise in these suits may be appropriately and finally decided. Jud.Code, § 237; 28 U.S.C. 344. P. 479.

(6) The claimants in the state proceedings are entitled to be heard, and are indispensable parties to any proceeding for the disposition of the property involved; convenient and orderly administration of justice requires that the jurisdiction of the state court should be respected. P. 480.

77 F.2d 866, 880, 881, affirmed.

Certiorari to review decrees which affirmed in three cases decrees of the District Court 10 F.Supp. 269, dismissing bills brought by the United States for an accounting and delivery of funds in the custody of the respondents.